The Palestinian Red Crescent said its medics had treated ten wounded.
"Eight people were wounded in the (police) incursion and two others by rubber-coated bullets," it said, adding that three were taken to hospital.
An AFP team near the entrance to the compound saw ambulances, heavily armed police and concrete blocks smashed into smaller pieces.
Elsewhere in the city, Palestinian youths threw rocks at passing buses, lightly injuring five Israelis, according to local media and the police, who said they had arrested two Palestinians.
The latest tensions in Jerusalem come as all three Abrahamic faiths mark major festivals: Jewish Passover, Christian Easter and the Muslim fasting month of Ramadan.
Weeks of mounting tensions saw two deadly attacks by Palestinians in or near the Israeli coastal city of Tel Aviv in late March and early April, alongside mass arrests by Israeli forces in the occupied West Bank.
On Friday morning, police clashed with Palestinians in the Al-Aqsa compound, including inside the Al-Aqsa mosque, drawing strong condemnation from Muslim countries.
The violence wounded some 150 people.
The United Nations has called for calm, a year after the last major conflict between Israel and Palestinian militants in Gaza.